TIFFANY & CO. Exhibit 99.1
NEWS RELEASE
Fifth Avenue & 57th Street Contacts:
New York, N.Y. 10022 ---------
James N. Fernandez
(212)230-5315
Mark L. Aaron
(212)230-5301
TIFFANY REPORTS FOURTH QUARTER, FULL YEAR RESULTS
-------------------------------------------------
New York, N.Y., February 28, 2005 - Tiffany & Co. (NYSE: TIF) announced its
results for the fourth quarter and fiscal year ended January 31, 2005. For the
year, net sales rose 10% to $2.2 billion. Net earnings rose 41%, aided by a gain
from the Company's sale of its equity stake in Aber Diamond Corporation. Strong
retail sales growth in the U.S. was partly offset by weak sales in Japan and a
lower gross margin.
For the three-month period (fourth quarter) ended January 31, 2005, net sales
rose 11% to $810,122,000, versus $731,588,000 in the prior year, and worldwide
comparable store sales rose 5%. On a constant-exchange-rate basis (see attached
"Non-GAAP Measures") that excludes the effect of translating
local-currency-denominated sales into U.S. dollars, net sales and comparable
store sales rose 9% and 3%.
Net earnings in the fourth quarter increased 96% to $217,040,000, or $1.48 per
diluted share, from $110,476,000, or 74 cents per diluted share, in the prior
year.
For the fiscal year, net sales increased 10% to $2,204,831,000, compared with
$2,000,045,000, and worldwide comparable store sales rose 7%. On a
constant-exchange-rate basis, net sales and comparable store sales increased 8%
and 4%.
Net earnings in the fiscal year rose 41% to $304,299,000, or $2.05 per diluted
share, compared with $215,517,000, or $1.45 per diluted share, in the prior
year.
As a result of the Company's sale of its Aber shares, fourth quarter and fiscal
year earnings included a pre-tax gain of $193,597,000, which, after tax, equated
to 85 cents per diluted share in the quarter and 84 cents per diluted share in
the year. Selling, general and administrative ("SG&A") expenses in the quarter
and year included these items of
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note: charges of $15 million related to the impairment of assets in one
international retail market and in one of the Company's specialty retail
concepts, as well as the exit costs of unwinding a separate retail concept that
the Company has decided not to pursue; a $25 million contribution to the Tiffany
& Co. Foundation; and a charge of $5 million in the quarter and $22 million in
the year due to the early adoption, retroactive to February 1, 2004, of
Statement of Financial Accounting Standards, No. 123R ("SFAS No. 123R"),
"Share-Based Payment." As a result of the Aber equity sale and these other
events, net earnings benefited by 67 cents per diluted share in the fourth
quarter and 59 cents per diluted share in the fiscal year.
Michael J. Kowalski, chairman and chief executive officer, said, "Tiffany's
operating performance in 2004 did not meet the objectives management set at the
start of the year. Although we achieved strong comparable store and total sales
growth in the U.S. and certain international markets, we did not achieve the
sales results we were looking for in Japan. Earnings in 2004 were significantly
affected by a decline in gross margin caused by sharply higher costs for
precious metals and diamonds, as well as by the geographic and product sales
mix."
Sales in the Company's channels of distribution were as follows:
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o U.S. Retail sales increased 10% to $396,960,000 in the fourth quarter
and 12% to $1,063,892,000 in the year. Comparable store sales
increased 7% in the quarter (New York flagship store rose 12% and
branch stores rose 6%) and increased 9% in the year (New York flagship
store rose 14% and branch stores rose 8%). Comparable store sales
growth was generated by higher spending per transaction and also
benefited from increased spending by tourists especially in the New
York flagship store. The success of four new stores also contributed
to sales growth in 2004. The Company now operates 55 TIFFANY & CO.
stores in the U.S.
o International Retail sales in the quarter rose 10% to $300,830,000 and
comparable store sales rose 1% (an increase of 5% and a decline of 3%
on a constant-exchange-rate basis). In the fiscal year, International
Retail sales increased 10% to $857,360,000 and comparable store sales
increased 3% (an increase of 4% and a decline of 3% on a
constant-exchange-rate basis). Sales by region on a
constant-exchange-rate basis were as follows: in Japan, comparable
store sales declined 7% in the quarter (total retail sales rose
fractionally) and 8% in the year (total retail
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sales declined 5%) primarily due to continued unit volume declines in
certain silver jewelry and designer jewelry categories; in the
Asia-Pacific region outside Japan, comparable store sales rose 4% in
the quarter and 11% in the year; and in Europe, comparable store sales
increased 2% in the quarter and 3% in the year. The Company operated
96 TIFFANY & CO. stores and boutiques internationally as of year-end.
o Direct Marketing sales increased 6% to $81,427,000 in the fourth
quarter and declined 1% to $195,461,000 in the year. Combined Internet
and catalog sales increased 10% in the quarter and 7% in the year due
to growth in the average order size. Business sales declined 4% in the
quarter and 17% in the year; management discontinued service
award-recognition program sales during 2003.
o Other sales (previously called Specialty Retail) increased 42% to
$30,905,000 in the quarter and 22% to $88,118,000 in the year. The
majority of the increases was due to: (i) sales of rough diamonds that
were purchased as part of larger assortments from certain mines but
were determined, in the normal course of business, to be unsuitable
for Tiffany's production; such sales commenced in the third quarter
and will continue on a regular basis as a component of the Company's
direct diamond sourcing initiatives; and (ii) sales growth in LITTLE
SWITZERLAND stores. Also contributing to sales were two
recently-opened IRIDESSE stores, which focus exclusively on the pearl
jewelry category.
Other Financial Highlights:
- ---------------------------
o Gross margin (gross profit as a percentage of net sales) in the fourth
quarter was 57.1% (versus 59.5% in the prior year) and was 56.0% in
the fiscal year (versus 57.9%). The largest portion of the declines
was due to LIFO inventory charges of $15,800,000 in the quarter
(versus $2,900,000 in the prior year) and $33,500,000 in the fiscal
year (versus $10,500,000 a year ago). The gross margin declines also
reflected changes in geographic and product sales mix, as well as
costs incurred to expand product distribution and
sourcing/manufacturing capacity.
o SG&A expenses increased 26% in the fourth quarter and 17% in the
fiscal year. As noted above, SG&A expenses in the fourth quarter
included charges related to impairment of certain assets and exit
costs to unwind a separate retail concept that the Company has decided
not to pursue; a contribution to the Tiffany & Co.
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Foundation; and the early adoption of SFAS No. 123R. As a result, SG&A
expenses as a percentage of net sales was 39.8% in the fourth quarter
(versus 35.0% in the prior year) and 42.6% in the fiscal year (versus
40.1% a year ago).
o The American Jobs Creation Act of 2004 (the "Act"), creates a
temporary incentive for U.S. companies to repatriate accumulated
foreign earnings by providing an 85% dividends received deduction for
certain dividends from controlled foreign corporations. This incentive
will effectively reduce the amount of U.S. Federal income tax due on
the repatriation. During the fiscal year ending January 31, 2006, the
Company currently plans to repatriate approximately $100 million of
accumulated foreign earnings in the form of extraordinary dividends,
as presently defined in the Act. The Company had previously accrued
income taxes on these earnings at historical statutory rates.
Therefore, an income tax benefit of $8.6 million has been recorded as
of January 31, 2005, pursuant to the Company's repatriation plans and
the current provisions of the Act.
o Net inventories at January 31, 2005 were 21% higher than at January
31, 2004. Combined raw material and work-in-process inventories
increased 35% due to expanded rough diamond sourcing and increased
costs of raw materials. Finished goods inventories rose 17% to support
expanded product offerings as well as the opening of new stores.
o The Company accelerated its rate of share repurchases during the
fourth quarter, repurchasing and retiring 1,300,000 shares of its
Common Stock at an average cost of $30.89 per share. In the fiscal
year, the Company repurchased and retired 2,735,000 shares of its
Common Stock at an average cost of $31.71 per share. Approximately $30
million remains available for future repurchases under the currently
authorized plan.
o The Company continues to be in a strong financial position. At January
31, 2005, cash and cash equivalents were $326,881,000 (versus
$276,115,000 a year ago), short-term and long-term debt totaled
$440,563,000 (versus $486,859,000 a year ago) and stockholders' equity
was $1,701,160,000 (versus $1,468,200,000 a year ago). Total debt as a
percentage of stockholders' equity was 26% at January 31, 2005,
compared with 33% a year ago.
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"Looking beyond 2004," Mr. Kowalski said, "Tiffany has maintained a long-term
approach by expanding its global reach with new stores, and reaching more
customers with compelling marketing messages focused on both a wide range of
newly-introduced designs as well as our classic product offerings. We are very
pleased that our involvement with Aber enhances our diamond supply and that the
gain from the sale of our equity investment enriches shareholder value. We were
also pleased that Tiffany's Board of Directors approved additional funding for
the Tiffany & Co. Foundation to advance its charitable giving strategy. The
charitable work of the Foundation has the collateral benefit of enhancing the
Company's image."
2005 Guidance:
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He continued, "For 2005, we believe the Company has the ability to achieve 8-10%
net sales growth and net earnings in a range of $1.45 - $1.55 per diluted share,
which of course, now includes the effect of approximately 10 cents per diluted
share from expensing equity-based compensation. This confirms the guidance that
we provided on January 7th and includes the following assumptions: opening a
total of 6-10 company-operated TIFFANY & CO. stores; comparable store percentage
sales growth in a mid-single-digit range in the U.S. and in a low-single-digit
range (in local currency) in Japan; a slight increase in gross margin; a
mid-single-digit percentage increase in SG&A expenses; other expenses, net of
approximately $20 million; an effective tax rate of 38.3%; capital expenditures
of approximately $175 million; and a single-digit percentage increase in net
inventory levels. However, we expect that net earnings in this first quarter may
be somewhat below 25 cents per diluted share (first quarter 2004 earnings as
adjusted downward by two cents per diluted share for the adoption of SFAS No.
123R) due to continued challenging conditions in Japan and the effect on gross
margin from precious metal and diamond cost increases."
Growth Objectives:
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Mr. Kowalski concluded, "Looking beyond 2005, we expect long-term earnings per
share growth of at least 12% annually over the following three years, which
assumes opening 6-10 company-operated TIFFANY & CO. stores annually, some
operating margin expansion, improvement in our return on assets, and continued
investments in longer-term growth opportunities such as the expansion of
specialty retail concepts and development of the TIFFANY & CO. brand in China.
We are unequivocally committed to maintaining the integrity of the TIFFANY & CO.
brand and continuing to deliver the
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excellence that our customers expect. Tiffany's experienced management team
remains enthusiastic about growing our business and maintaining a leading
industry position."
Financial Results
- -----------------
Results for fiscal 2004 are unaudited. The audit of the Company's financial
statements will be completed with the issuance of its Report on Form 10-K.
Risk Factors
- ------------
This document contains certain "forward-looking statements" concerning the
Company's objectives and expectations with respect to store openings, retail
prices, gross profit, expenses, inventory performance, capital expenditures and
cash flow. In addition, management makes other forward-looking statements from
time to time concerning objectives and expectations. As a jeweler and specialty
retailer, the Company's success in achieving its objectives and expectations is
partially dependent upon economic conditions, competitive developments and
consumer attitudes, including changes in consumer preferences for certain
jewelry styles and materials. However, certain assumptions are specific to the
Company and/or the markets in which it operates. The following assumptions,
among others, are "risk factors" which could affect the likelihood that the
Company will achieve the objectives and expectations communicated by management:
(i) that low or negative growth in the economy or in the financial markets,
particularly in the U.S. and Japan, will not occur and reduce discretionary
spending on goods that are, or are perceived to be, "luxuries"; (ii) that
consumer spending does not decline substantially during the fourth quarter of
any year; (iii) that unsettled regional and/or global conflicts or crises do not
result in military, terrorist or other conditions creating disruptions or
disincentives to, or changes in the pattern, practice or frequency of tourist
travel to the various regions where the Company operates retail stores nor to
the Company's continuing ability to operate in those regions; (iv) that sales in
Japan will not decline substantially; (v) that there will not be a substantial
adverse change in the exchange relationship between the Japanese yen and the
U.S. dollar; (vi) that Mitsukoshi and other department store operators in Japan,
in the face of declining or stagnant department store sales, will not close or
consolidate stores which have TIFFANY & CO. retail locations; (vii) that
Mitsukoshi will continue as a leading department store operator in Japan; (viii)
that existing product supply arrangements, including license arrangements with
third-party designers Elsa Peretti and Paloma Picasso, will continue; (ix) that
the wholesale and retail market for high-quality rough and cut diamonds will
provide
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continuity of supply and pricing; (x) that the Company's diamond initiatives
achieve their financial and strategic objectives; (xi) that the Company's gross
margins in Japan and for diamond products can be maintained in the face of
increased competition from traditional and e-commerce retailers; (xii) that the
sale of counterfeit products does not significantly undermine the value of the
Company's trademarks and demand for the Company's products; (xiii) that new and
existing stores and other sales locations can be leased, re-leased or otherwise
obtained on suitable terms in desired markets and that construction can be
completed on a timely basis; (xiv) that the Company can achieve satisfactory
results from any current and future ventures into which it enters that are
operated under non-TIFFANY & CO. trademarks or trade names; and (xv) that the
Company's expansion plans for retail and direct selling operations and
merchandise development, production and management can continue to be executed
without meaningfully diminishing the distinctive appeal of the TIFFANY & CO.
brand.
Conference Call
- ---------------
The Company will host a conference call today at 8:30 a.m. (EST) to review its
results and outlook. Interested parties may listen to a broadcast on the
Internet at www.tiffany.com (click on "About Tiffany," "Shareholder
Information," "Conference Call") and at www.streetevents.com.
Next Scheduled Announcement
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Investors and analysts should note that the Company anticipates reporting its
first quarter results on May 13, 2005 and conducting a conference call at 8:30
a.m. (EST) that day, to be broadcast at www.tiffany.com and
www.streetevents.com. To receive future notifications for conference calls
and/or news release alerts, interested parties may register at www.tiffany.com
(click on "About Tiffany," "Shareholder Information," "Calendar of Events" and
"News by E-Mail").
Company Description
- -------------------
Tiffany & Co. (NYSE: TIF) operates jewelry and specialty retail stores and
manufactures products through its subsidiary corporations. Its principal
subsidiary is Tiffany and Company. The Company now operates more than 150
TIFFANY & CO. retail stores and boutiques in the Americas, Asia-Pacific and
Europe and engages in direct selling through Internet, catalog and business gift
operations. The Company's Other operations include consolidated results from
ventures operated under trademarks or trade names other than
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TIFFANY & CO. For additional information, please visit www.tiffany.com or call
our shareholder information line at 800-TIF-0110.
This press release contains certain "forward-looking" statements concerning
expectations for sales, store openings, gross margins, expenses, earnings,
inventories and capital expenditures. Actual results might differ materially
from those projected in the forward-looking statements. Information concerning
risk factors that could cause actual results to differ materially is set forth
above. The Company undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent events or circumstances.
# # #
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TIFFANY & CO. AND SUBSIDIARIES
------------------------------
NON-GAAP MEASURES
- -----------------
The Company reports all required information in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP"), but management believes that ongoing
operating results are more difficult to understand if only GAAP financial
measures are available to review. Internally, management monitors the sales
performance of its international subsidiaries on a non-GAAP basis that excludes,
from GAAP reported sales, the positive or negative effects that result from
translating sales of its international subsidiaries into U.S. dollars
(constant-exchange-rate basis). Management uses this constant-exchange-rate
measure because it believes it is a more representative assessment of the sales
performance of its international subsidiaries and provides for better
comparability between reporting periods.
The Company's management does not itself, nor does it suggest that investors
should, consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP. The
Company presents such non-GAAP financial measures in reporting its financial
results to provide investors with an additional tool to evaluate and analyze the
Company's operating results. The following tables reconcile net sales percentage
increases (decreases) measured and reported in accordance with GAAP to the
non-GAAP constant-exchange-rate basis:
Three Months Ended Fiscal Year Ended
January 31, 2005 January 31, 2005
----------------------------------------- --------------------------------------------
GAAP Constant GAAP Constant
Reported Trans- Exchange Reported Trans- Exchange
Net lation Rate Sales Net lation Rate Sales
Net Sales: Sales Impact Sales Impact
- ---------- ----------------------------------------- --------------------------------------------
Worldwide 11% 2% 9% 10% 2% 8%
International Retail 10% 5% 5% 10% 6% 4%
Japan Retail 4% 4% - 1% 6% (5%)
Other Asia-Pacific 22% 4% 18% 27% 4% 23%
Europe 24% 10% 14% 23% 11% 12%
Three Months Ended Fiscal Year Ended
January 31, 2005 January 31, 2005
----------------------------------------- --------------------------------------------
GAAP Constant GAAP Constant
Reported Trans- Exchange Reported Trans- Exchange
Net lation Rate Sales Net lation Rate Sales
Comparable Sales Impact Sales Impact
Store Sales:
- ------------ ----------------------------------------- --------------------------------------------
Worldwide 5% 2% 3% 7% 3% 4%
International Retail 1% 4% (3%) 3% 6% (3%)
Japan Retail (3%) 4% (7%) (2%) 6% (8%)
Other Asia-Pacific 7% 3% 4% 15% 4% 11%
Europe 12% 10% 2% 13% 10% 3%
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three Months
Ended January 31, Years Ended January 31,
------------------------------- ---------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ 810,122 $ 731,588 $ 2,204,831 $ 2,000,045
Cost of sales 347,715 296,543 971,164 842,663
------------ ------------ ------------ ------------
Gross profit 462,407 435,045 1,233,667 1,157,382
Selling, general and administrative expenses 322,107 256,163 939,138 801,863
------------ ------------ ------------ ------------
Earnings from operations 140,300 178,882 294,529 355,519
Other expenses, net 2,580 2,138 15,978 12,834
Gain on sale of equity investment 193,597 - 193,597 -
------------ ------------ ------------ ------------
Earnings before income taxes 331,317 176,744 472,148 342,685
Provision for income taxes 114,277 66,268 167,849 127,168
------------ ------------ ------------ ------------
Net earnings $ 217,040 $ 110,476 $ 304,299 $ 215,517
============ ============ ============ ============
Net earnings per share:
Basic $ 1.50 $ 0.75 $ 2.08 $ 1.48
============ ============ ============ ============
Diluted $ 1.48 $ 0.74 $ 2.05 $ 1.45
============ ============ ============ ============
Weighted-average number of common shares:
Basic 144,854 146,682 145,995 145,730
Diluted 146,688 149,795 148,093 148,472
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
January 31, January 31,
2005 2004
---------------- ----------------
ASSETS
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Current assets:
Cash and cash equivalents $ 326,881 $ 276,115
Accounts receivable, net 133,545 131,990
Inventories, net 1,057,245 871,251
Deferred income taxes 64,790 45,043
Prepaid expenses and other current assets 25,428 23,683
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Total current assets 1,607,889 1,348,082
Property, plant and equipment, net 917,853 885,092
Other assets, net 140,376 157,914
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$ 2,666,118 $ 2,391,088
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings $ 42,957 $ 41,948
Current portion of long-term debt - 51,920
Accounts payable and accrued liabilities 186,013 209,842
Income taxes payable 118,536 45,922
Merchandise and other customer credits 52,315 45,527
-------------- --------------
Total current liabilities 399,821 395,159
Long-term debt 397,606 392,991
Postretirement/employment benefit obligations 40,220 36,746
Deferred income taxes 33,175 22,397
Other long-term liabilities 94,136 75,595
Stockholders' equity 1,701,160 1,468,200
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$ 2,666,118 $ 2,391,088
============== ==============
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